In this paper alternative approaches to intertemporal allocation and prices are considered (Section I) and used to reject some claims and criticisms on the equality of transformation rates and relative prices in an intertemporal framework appeared in recent literature (Section II). It is argued that the extension of conventional results to the intertemporal case is prevented by the nature of intertemporal exchange in a capitalist economy (Section III).
In recent economic literature a number of conflicting views have been expressed about the equality between interest rates, rates of return on investment, and rates of time preference; and about the very notion of internal rate of return. R.M. So-Low regards such equality as a particularly significant result, and treats the notion of the internal rate of return as the very foundation of capital theory (1963, 1966, 1967). L.L. PASINETTI denies that such an equality can hold even within the Fisherian framework (1969). C.R.S. DOUGHERTY vindicates the legitimacy of the Fisherian approach and claims it is 'dynamic', and regards the internal rate of return as an element of a 'search rule' for consumption optimization. In this paper alternative approaches to intertemporal allocation and prices are considered (Section 1) and used to reject these claims and criticisms on the equality of transformation rates and relative prices in an intertemporal framework, while the internal rate of return appears to have neither theoretical nor operational significance (Section 2). It is argued that the extension of conventional results to the intertemporal case is prevented by the nature of intertemporal exchange in a capitalist economy, namely by the absence of markets for future manufactured commodities. Since money is the only forward market extant (with the exception of forward markets for a handful of primary products) interest rates cannot be considered to measure rates of return on or preference rates for anything other than... [ABSTRACT FROM AUTHOR]